“People come to Spotify and they stay on Spotify.” — Daniel Ek, CEO, Spotify
Spotify unleashed its Q2 earnings this morning. (Transcript HERE.) Investors reacted to the cautious tone expressed by CEO Daniel Ek (notwithstanding the seemingly positive and partially puzzling quote above), pulling the stock price sharply downward. Within that framework of reaction, Spotify did report increased revenue and surging subscribers.
The points below cover the essential ground in today’s news:
- User Growth: Monthly active users (MAUs) reached 696 million, an 11% year-over-year increase, exceeding forecasts. Premium subscribers also grew by 12% to 276 million, also surpassing expectations.
- Revenue: Total revenue reached €4.19 billion ($4.85 billion), a 10% year-over-year increase. However, this fell short of the €4.3 billion guidance due to currency headwinds.
- Net Loss: Spotify reported a net loss of 86 million euros, attributed to higher personnel and marketing costs (according to The Wall Street Journal.)
- Advertising Business: The advertising business underperformed, with Spotify CEO Daniel Ek
acknowledging it as a weak spot and an area needing faster execution. - Margin Pressure: Gross margins saw a slight decline, and Spotify expects further slippage in the third quarter.
Despite the year-over-year revenue increase, the net loss plus failure to meet previous guidance disappointed investors and brought out their instinct to punish, sending the stock price off a cliff.
